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Pros and Cons of the Freemium Business Model for WordPress Plugin Developers

Does giving away a plugin for free help you to sell more premium plugins?

In the last few years, the WordPress premium plugin industry has exploded into life. In my opinion, the growth of premium plugins is responsible for revolutionizing the WordPress platform more than any other single factor in recent years — premium plugins make powerful, sophisticated functionality available to all.

It hasn’t always been this way, but these days most WordPress users won’t flinch at the idea of dropping $20 – $50 or so on a few top quality plugins. Love them or hate them, the Envato marketplaces are one of the big reasons behind this – today, CodeCanyon alone lists more than 3,700 premium WordPress plugins.

With lucrative rewards on offer, the quality of the average WordPress plugin has skyrocketed. This can only be a good thing for WordPress users.

The downside of the premium plugin era, however, is that the market is now more competitive than ever before. As a result, many exceptional plugin developers are unable to make a good living from their plugins.

If you’re one of the struggling developers, this can be incredibly frustrating, but what can you do? Well, one of the more popular strategies is to give a plugin away for free by listing it on the WordPress repository, in a bid to drive premium plugin sales. In other words, the so-called “freemium business model.”

But is this a good idea? It seems counter-intuitive, so does giving a plugin away for free really work?

Well, that’s what I’m here today to discuss: the pros and cons of WordPress plugin developers adopting the freemium business model.

And remember: if you do decide to go the freemium route, you’re in good company. It’s a business model successfully employed by many of the top plugin developers in the industry, some of whom I’ll be listing throughout today’s post.

Before we begin, though, in my mind there are four viable freemium business models worth considering:

Offering a free plugin unrelated to any of your premium plugins to generate more awareness of your brand.

Selling premium support for your free plugin.

If you can think of any other variation of the freemium business model, the arguments outlined in today’s post should still hold true. With that out of the way, let’s kick things off by looking at the benefits of releasing a free plugin.

Pros of the Freemium Business Model

1. Extra Exposure

As we’ve already discussed, the market for WordPress plugins is incredibly competitive. There are countless exceptional plugins getting lost in the wilderness, never receiving the recognition they truly deserve.

Allow me to introduce a simple truth: offering your plugin for free in the official directoryguarantees more downloads than selling premium exclusively. And, in most cases, it isn’t even close, with the free plugin receiving vastly more downloads. Don’t believe me? Here are some figures for you (Note: the comparisons aren’t perfect admittedly — plugin updates are added to download counts, which artificially inflates the total figure — but it’s the best comparison we have):

With huge download volumes potentially on offer, the freemium business model is one of the best ways for plugin developers to build a name, build a brand, and build a reputation for themselves.

It isn’t a case of just throwing a free plugin together and reaping the rewards, however – the free plugin directory is pretty darn competitive, too.

If you’re looking to enhance your reputation by releasing a free plugin, well, that free plugin has to be worthy of enhancing a reputation. That means the highest coding standards; a user friendly interface; and some neat, eye-catching functionalities. In other words, the better the free plugin, the better the results – after all, you’re attempting to impress people en masse here.

By making a name for yourself in the free directory, you can expect this to carry through to your premium plugins.

2. Upsells

If you’re looking to make a living by selling plugins, the main goal of the freemium business model is to generate upsells.

The dictionary definition of an upsell is easy enough to understand: it’s when you convince a customer to buy something more expensive. In this scenario, you want users to trade in your free plugin for premium. This involves a very simple chain of events (simple on paper, anyway):

Now, if you released a free version of your plugin, you can expect your plugin to be downloaded and installed on a far greater number of WordPress websites. Let’s say 5,000.

As long as more than 100 of your 5,000 users decide to upgrade to the paid version, you’re immediately better off. With 5,000 users, this is very realistic (if your plugin is good), and there’s even a good chance that considerably more than 100 users will upgrade.

Now let’s look at it from a different freemium business’s perspective. If your strategy for monetization is to sell premium extensions — a la Pippin Williamson’s Easy Digital Downloads — then the situation is even more straightforward: the key to profit maximization is to increase the core user base.

The free price tag attracts users to the core, then they buy premium extensions to extend the core functionality. More core users easily translates into more premium extension sales, so giving the core plugin away for free is a no-brainer.

This is the logic at the very heart of the freemium business model. So far, it’s proven to be very effective.

3. Give Something Back

Our final point in the pros column is a noble one: giving away a free version of your plugin is a way to give something back to the WordPress community. Remember: we all download and use the open-source WordPress core without spending a dime, and the community depends on quality contributions.

Even if you’re completely profit-driven, the opportunity to give something back to the community you make a living from can still make you feel warm and fuzzy inside. It’s also your chance to help grow the platform — and in the long-run, this means more WordPress users who are looking to buy premium plugins!

Cons of the Freemium Business Model

1. Cannibalization

The biggest downside to giving your plugin away for free is an obvious one: you won’t make any money. (Well, not from the free download initially, anyway. It isn’t all doom and gloom, however, as we’ve spent the first half of this post outlining some of the potential upsides to the huge download figures associated with free plugins!)

Some people were never planning to buy your plugin, though. Don’t worry about these users for now, as they don’t represent lost revenue.

What about the people who were going to buy your plugin, though, until they realized the free version was available? This most certainly is a source of lost revenue, through a process known as cannibalization.

Now, the marketing definition of cannibalization is the negative impact a business’s newly released product has on the sales and demand of an existing product. This is perhaps best illustrated with a simple example.

My business manufactures a revolutionary new product, Product A, which sold 50,000 units in Year One.

In Year Two, I release a second, related product, Product B. Product B sells 40,000 units in Year Two, while demand for Product A drops to 10,000 units.

Looking at the scenario outlined above, I might feel pleased with the sales of Product B in Year Two. Rather than increasing the demand for my business’s products, however, Product B has simply cannibalized 40,000 units’ worth of sales from Product A. I haven’t sold any extra products, I’ve merely shifted demand over from Product A to Product B.

This is potentially a very serious problem if you work hard to release an outstanding Lite version of your plugin to sit alongside your Pro version — if the Lite version has enough features, you’re potentially giving users no reason to upgrade.

In such a scenario, the Lite version of your plugin will cannibalize sales of the Pro version – you’re effectively diverting customers away from the premium plugin, towards the free plugin. How many sales will you lose? That’s impossible to say with any certainty, of course.

It’s also worth making a simple clarification. If you generate 50,000 downloads for your free plugin, don’t kick yourself over the loss of 50,000 sales of your premium plugin — this was never going to happen. Don’t concern yourself with the users who were only interested in the free plugin; you’ve only lost money from the users that chose to downgrade because of the availability of your free plugin — there is a clear distinction.

Want to keep cannibalization rates to a minimum? Then make your plugins less interchangeable.

What do I mean by this? Your Lite plugin should not be an out-and-out replacement for the Pro plugin — the Pro plugin should represent a significant upgrade. This is achieved by giving your premium plugin several powerful, exclusive, premium-only functionalities to really justify that price tag.

2. Delicate Balancing Act

In many ways, releasing a free plugin is a trade-off between the benefits of the extra exposure that producing an exceptional plugin brings and the drawback of the high cannibalization rates associated with that exceptional plugin.

This is a big dilemma, and understandably so: on one-hand you want to wow people with your free plugin; on the other hand, you don’t want to make it so good that it makes the premium plugin effectively redundant.

Many plugin developers struggle with the delicate balancing act between adding great functionality to their free plugin and holding some back for the premium version.

If you get this wrong and cull too much functionality from the free version, you miss out on the brand-enhancing benefits. Make it too good and users won’t need to upgrade to the premium version, though.

Like I said, it’s a delicate balancing act — and one that may require a fair amount of trial-and-error before you get it right.

3. Support Commitments

Now, if you want a long shelf life for your free plugin, you must provide updates. Outdated plugins are associated with security vulnerabilities and this can destroy your brand. Slightly less concerningly, you need to keep your plugin updated to ensure compatibility with the latest version of WordPress. Fail to continuously update your plugin and downloads will drop off a cliff at some point.

The issue of user support is far more subjective – most plugin developers believe some plugin support is required but will disagree over the level of support they think is appropriate for a free plugin. Regardless of your take on this, however, one thing is undisputable: supporting a plugin, especially when doing so for free, is one of the biggest time sinks a developer will experience.

You might set out with the best of intentions only to renegade on your stance when your free plugin becomes too popular for you to handle. The level of support you provide is ultimately your decision, but keep this in mind: Outstanding support enhances reputations, generates goodwill from users, and helps users extract the maximum from your plugins. Combined, these factors will result in more downloads of your free plugin and more sales of your premium one.

Final Thoughts

In my opinion, releasing a free plugin is a great way to build a name for yourself as a developer. This is especially true if you’ve so far struggled to drum up interest taking the premium route exclusively.

If you do decide to release a free plugin, I recommend making it the best plugin you can. Sure, there are downsides to this, but the potential upsides of an enhanced reputation is far more valuable — it gives you the platform to carve out your own little niche in the WordPress marketplace.

Of course, this is just my opinion, so I’d love to throw the question to the floor. Do you think that “going freemium” is the best business model for new plugin developers? More importantly, why do you think this? Share your thoughts and experiences in the comments section below!

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5 Comments

That “delicate balancing act” is the really tough part if you’re working with a niche plugin. Aside from struggling over having too may or too few features in the free version, you also need to focus on which features will sell.

When I started a base/addon model for one of my plugins, I thought I’d knock off a few easier addons first. That was dumb. I finally released the plugin I should have been building all along, and it sells more copies than all of my other products combined.

It seems obvious in retrospect, but before you embark on a free/pro or base/addon model, you should think very carefully about what exactly will be your big seller features. My sense (from limited experience) is that these tend to cluster around branding (can I make this form, template, email look great?) and workflow (do I use this plugin as part of a bigger workflow, and are there things I need to integrate with that?).

Branding and workflow… that is some good insight. Looking at the Easy Digital Downloads extensions, a great deal of them are integrations. “Make your life easier” kinds of things. $50 is nothing for something that will save you hours of work or make something possible in the first place, huh?

Great post! Really enjoyed reading it. As Nate mentioned, it could be really challenging to figure out what features should be monetized.

Based on my experience, the best monetized features are the ones that can be quantified into a $$$ value for the publisher. For example, the killer feature at RatingWidget (https://wordpress.org/plugins/rating-widget/) is the Rich-Snippets integration. Based on many studies, on average, snippets in SERP increase the CTR by 30%. That means more traffic to the site which can be quantified to $$$. Another great example is the exit-intent opt-in pop-up plugins like PopupMaker. Generate more leads == $$$.

My recipe for successful Freemium plugin is to make the “lite” version the most user-friendly plugin in its category. So friendly that it just works right after the install. It should also cover all the basic functionality. Then, once you “capture” the user with the ease of use, due to the lazy nature of humans and the fact that we don’t like to switch something that is already working well, it’s a good time to upsell the extra features by marketing the value of the features (not the functionality). E.g. GOOD: “Increase your search traffic with rich snippets by 30%”. BAD: “Rich-snippets integration to show 5-star ratings in SERP”.

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